Examples of extending party autonomy
The discipline of private international law was fully developed at the same time as the nation state and the two concepts are intrinsically linked. The role of the state has changed through globalisation but private international law is still founded on the 19th century concepts of the nation state, a time when the paradigm of state sovereignty was paramount. The connecting point for finding the applicable law is the state. The key principle is that as private commercial transactions are not covered by public international law, they are by necessity covered by a state law, and all that private international law should solve is which state covers the transaction. Therefore, traditionally the discipline leaves little room for a choice of law for non-state rules. Applicable law is geographically and territorially confined.
The absence of the possibility to choose non-state rules can be explained on the basis that there is a presumption that the contract laws of (liberal) states are interchangeable because they arc based on the same societal needs, and that as non-state rules are not based on those needs they arc not interchangeable with state laws. Muir Watt argues that this argument is not altogether logical because non-state rules could be qualitatively better than a given state law, and if mandatory laws and public policy form a safeguard
Non-state rules and private international law 125 then it really does not matter whether non-state rules are based on those same societal needs. It is also dangerous to assume that the sole fact that the chosen law is a state law means that it provides for the same societal needs as the lex fori.[1]
Would it be easier for states where no substantive relationship is required to accept a choice of law clause for non-state rules than for countries where this is required? This would not necessarily be the case. If party autonomy is restricted to laws with a substantive relationship to the contract then the points of connection could include trade associations and international commercial custom. When a choice for the law of New York is accepted on the basis that this law has significant experience with the music industry it is equally viable that a choice of law for the UNIDROIT Principles could be justified based on their expertise in international commerce.
In the US there are two examples of state law that have a wider definition of the world law and potentially allow for a choice of law for non-state rules. These are Oregon and Louisiana. Neither of these requires a substantive connection between the chosen law and the contract.
The 2001 Oregon Choice of law codification uses the word ‘law’ instead of‘state law.’ This implies that it would be possible to choose a law, which is not attached to a state. However, if we look further into the codification the definition of the word law is given in §81.100 'any rule of general legal applicability adopted by a state, whether that rule is domestic or foreign and whether derived from international law, a constitution, statute, other publicly adopted measure or published judicial precedent.This implies that the chosen law must be that of a state.
§81.100 defines a state as follows: ‘“State” means the United States, any state of the United States, any territory, possession or other jurisdiction of the United States, any Indian tribe, other Native American group or Native Hawaiian group that is recognized by federal law or formally acknowledged by a state of the United States, and any foreign country, including any territorial subdivision or other entity with its own system of laws. ’ If one follows certain theories the merchant community could be seen as an independent entity with its own system of law (the lex mcrcatoria). This was discussed in chapter two. Therefore, would it be possible to argue that a choice of law for the lex mcrcatoria would be valid under Oregon law based on this definition? Theprospect is interesting even if it is extremely doubtful whether the merchant community is a real coherent entity with its own clearly defined set of laws. As discussed in chapter two there is too much uncertainty over the content of the lex mercatoria, its legal boundaries, and it is difficult to regard merchants as a distinct community. It would thus be difficult to argue that under this article a choice of law for the lex mercatoria is viable, especially given that it is clear that with entity, it is likely to mean a geographical reference.
The key to a choice of law for non-state rules can be found in the official comments to Section 7, which state that the parties may select model rules or principles such as the UPICC as a choice of law.[2] Party autonomy in Oregon can thus be extended to include a choice for non-state rules. It seems that this is restricted to codified non-state rules given the way the comments are formulated and the example of the UPICC. It is unclear from the comments whether uncodified non-state rules would constitute an acceptable choice.
The Oregon code specifics that if parties have not made a choice of law then the court must find the most appropriate law for the contract. The court must first identify which states have a relevant relationship with the transaction, then identify whether there are any underlying public policies of the laws that are relevant, and third evaluate the relative strength and pertinence of these policies. As the first step is to identify the states that have a relevant connection with this transaction it is evident that this excludes non-state rules.
The second example is that of Louisiana. In the preliminary title of the civil code published in 1807 Louisiana codified its private international law
Non-state rules and private international law 127 but the provisions were limited and therefore mainly relied on case law.[3] In 1992 a specific conflicts of law codification was introduced. Regarding choice of law, this codification states: ‘All other issues of conventional obligations are governed by the law expressly chosen or clearly relied upon by the parties, except to the extent that the law contravenes the public policy of the state whose law would otherwise be applicable. ’ This article does not say ‘state law’ or ‘law of a state,’ but only uses the word law. This leaves some discretion to the adjudicator to decide what law is. Professor Symeonides, who was the Rapporteur for the codification, has stated that a choice for non-state rules would be acceptable. Unlike the Oregon codification the Louisianan Civil Code does not contain any definition of the word law.
If one contrasts Article 3540 with Article 3537 that contains the general rule in absence of a choice of law clause there is a clear distinction. Article 3547 states that ‘except as otherwise provided in this Title, an issue of conventional obligations is governed by the law of the state whose policies would be most seriously impaired if its law were not applied to that issue? This article manifestly refers to the law of a state whereas the choice of law article only uses the word law. This indicates a deliberate decision to omit the word state from article 3540 and would therefore lead to a tentative conclusion that a choice of law for non-state rules is acceptable.
There are several categories of jurisdictions that allow for a choice of non-state rules. The first one is where the possibility to choose non-state rules is codified in law. This is for instance the case with Oregon (as discussed) and Paraguay (which has recently adopted the Hague Principles on Choice of Law. ) The second category does not allow for this explicitly but implies the possibility by defining law in a broader way. Louisiana is an example of this. This is also the case in some other jurisdictions. For instance, Talpis advances that in Quebec a choice of law for non-state rules would be acceptable per Article 3111 of the Québécois civil code. The reasons arc that the concept of autonomy in the Québécois civil code is far-reaching and in the first paragraph the article does not use ‘law of a state’ but ‘law.’
The third category is those jurisdictions where case law indicates acceptance of a choice of law for non-state rules. An example is Venezuela where the Supreme Court accepted a choice of law for the lex mercatoria.[4] Venezuela and Mexico have ratified the OAS convention that could potentially allow a choice of law for non-state rules. Venezuela has incorporated the text of article 9 and 10 of the OAS Convention in its private international law regulation and this gives non-state rules a key role in international contracts. These articles require the court to take into account principles of international commercial law as accepted by international organisations, trade usages, and customs.
The Supreme Court of Colombia has stated that parties can choose non-state rules as the law of the contract provided these do not run counter to public policy and mandatory legal provisions. This gives a significant place to non-state rules, but in the context of an applicable state law. It is not clear from this case, which exact conditions the choice of law clause must meet and whether all non-state rules would be an acceptable choice.
In 2005 the Bundesgcricht in Switzerland stated that opinions are divided on whether the parties can choose non-state rules as the law of the contract and this choice could be affirmed with regards to sets of general principles prepared independently and with an equilibrium and comprehensiveness comparable to domestic law such as the UNIDROIT Principles. In this case the parties included the FIFA rules in their choice of law clause and the Court stated that rules such as these prepared by private organisations could not be considered as the applicable law. A caveat should be placed here; the choice of law clause included a reference to Swiss law as well as to the FIFA Rules. It is unclear whether the decision of the Bundesgcricht should be
N on-state rules and private international law 129 interpreted in a way that would allow non-state rules to be the sole governing law.
In two Brazilian cases the Court applied the UNIDROIT Principles in absence of a choice of law clause. In both cases the court eschewed the traditional connecting point to establish the applicable law (the lex loci contractus) but stated that as there were multiple connecting points a more flexible approach was needed to decide the applicable law.[5] The Court then applied the CISG and the UNIDROIT Principles as an expression of the new lex mcrcatoria. This choice indicates that if private international law takes a more holistic approach that goes beyond territory to include other connecting factors to determine the applicable law then this could lead to the application of non-state rules.
Finally, private international law can refer to non-state rules outside of the context of the governing law. It can allow for parties to incorporate them by reference or for courts to use them to interpret the applicable law. The examples of the Rome I Regulation, the Restatement (Second) on the Conflicts of Laws, and the UCC were already discussed in the previous chapter. Other examples include Panama where the law states that the UNIDROIT Principles could be used as a subsidiary rule in addition to the applicable law or to interpret the law in international commercial contracts. These private international laws thus accord an importance place to non-state rules but only in conjunction with an applicable state law.
- [1] Ibid, 264/265. 2 Morris J Levin, ‘Party Autonomy: Choice-of-Law Clauses in Commercial Contracts’ (1957-1958) 46 Georgetown Law Journal 260. 3 Radioactive, J.V, v Manson, 153 F. Supp. 2d 462 (S.D.N. Y 2001). 4 Oregon: § 81.120 Choice of law made by parties: Except as specifically provided (...) the contractual rights and duties of the parties are governed by the law or the laws that the parties have chosen http://www.oregonlaws.org/ors/2007/81.120. 5 §81.100. Definitions for ORS 81.100 to 81.135 38 WLR 397 (2002) http://www.oregonlaws.org/ors/2007/81.100. 6 § 81.100. Definitions for ORS 81.100 to 81.135 38 WLR 397 (2002) http://www.oregonlaws.org/ors/2007/81.100.
- [2] See: Annex HI, Comments § 7(3) Report on Conflicts Law Applicable to Contracts - LC 2255 https://willamette.edu/wucl/centers/olc/reports/rcports/adopted.html ‘In exercising this autonomy, parties may select model rules or principles. For example, parties to an international contract may choose to have it governed by the Unidroit Principles of International Commercial Contracts.’ For further information, see these articles: James A R Nafziger, ‘Oregon’s conflicts law applicable to contracts’ (2002) 38 Willamette Law Review 397 Symeon S Symeonides, ‘Oregon’s choice of law codification for contract conflicts: an exegesis’ (2007) 44 Willamette Law Review 205. 2 §81.130 General rule http://www.oregonlaws.org/ors/2007/81.130. 3 For a more in-depth discussion of private international law in Louisiana see the works by professor Symeonides. A small selection: Symeon C Symeonides, ‘The Conflicts Book of the Louisiana Civil Code: Civilian, American, or Original?’ (2008) 83 Tulane Law Review 1041; Symeon C Symeonides, ‘Les Grands Problèmes de Droit international Privé et la Nouvelle Codification de Louisiane’ (1992) 81 Revue Critique de Droit International Privé 223; Symeon C Symeonides, ‘Louisiana Conflicts Law: Two ‘Surprises’ (1994) 54 Louisiana Law Review 497; See also: Russell J Weintraub, ‘Courts Flailing in the Waters of the Louisiana Conflicts Code: Not Waving but Drowning* (2000) 60 Louisiana Law Review 4; Carol S Bruch, ‘Codifications of Conflicts Law: The Louisiana Draft’ (1987) 35 American Journal of Comparative Law 255.
- [3] Symeon C Symeonides, 'Louisiana Conflicts Law: Two ‘Surprises’ (1994) 54 Louisiana Law Review 497. 2 Louisiana Civil Code article 3540: http://www.legis.state.la.us/lss/lss.asp?doc=l 10561. 3 Symeon C Symeonides, ‘Contracts subject to Non-State Norms’ (2006) 54 American Journal of Comparative Law 209, 222. 4 Art. 3537 General rule http://legis.la.gov/Legis/Law.aspx?p=y&d=l 10557. 5 Jeffrey Talpis, ‘Retour Vers le Futur : Application en Droit Québécois des Principes d’Unidroit au Lieu d’une Loi Nationale’ (2002) 36 Revue Juridique Thémis 609; Article 3111 Code Civil du Québec. L’acte juridique, qu’il présente ou non un élément d’extranéité, est régi par la loi désignée expressément dans l’acte ou dont la désignation résulte d’une façon certaine des dispositions de cet acte. Néanmoins, s’il ne présente aucun élément d’extranéité, il demeure soumis aux dispositions impératives de la loi de l’Etat qui s’appliquerait en l’absence de désignation. On peut désigner expressément la loi applicable à la totalité ou à une partie seulement d’un acte juridique. 6 Ibid, 619-620.
- [4] Maria Mercedes Albornoz, ‘Choice of Law in International Contracts in Latin American Systems’ (2010) 6 Journal of Private International Law 23, 37; citing the case: Banco Union v Bangui Worms [1989] Corte Suprema de Justicia, 144 Gaceta Forense 507. 2 Articulo 30 у 31 de la Ley de Derecho International Privado venezolana. 3 Rafael Alberto Martinez Luna у Maria Mercedes Bernal Cancino vs. Granbanco S.A, Corte Suprema de Justicia, 21.02.2012 It concerned a civil claim against a bank by two Colombian citizens with regards to a loan agreement. The plaintiffs claimed that as a result of the financial crisis in Colombia the contract became more onerous than when they contracted and that this created an imbalance in the contract. The lower courts ruled that there was not enough evidence to prove this. This was confirmed by the Supreme Court. The Supreme Court recognised that there is a general principle of revision of the contract under Colombian law, but that this case did not meet the criteria. The Court furthermore stated that this principle is part of the lex mercatoria. The court cited the UNIDROIT Principles articles 6.2 . Land 6.2.3 as evidence of this. In the reasoning the court then stated that parties can choose non-state rules: ‘Indispensable aclarar que las partes ptteden regular el contrato mercantil international par sus reglas, en cuyo case, aplican de preferencia a la ley national no imperativa,’. 4 X AG v Y, Bundesgericht (2005) BGE 132 II 285 S 285 Available at: http://www.unilex.info/principles/case/1124.
- [5] Noridane Foods S.A. v. Anexo Comercial Importado e Distribuiyao Ltda. (2017) Court of Appeal of Rio Grande do Sul 70072362940 Abstract available at: http://www.unilex.info/principles/case/2035 Voges Metalurgia Ltda. v. Inversiones Metalmecanicas I.C.A. - IMETAL I.C.A. (2017) Court of Appeal State of Rio Grande do Sul 4-25.2016.8.21.7004192500 Abstract available at: http://www.unilex.info/principles/case/2042. 2 Ley № 7 - Código de Derecho Internacional Privado de la República de Panamá, Articulo 86 & 87.
